Concord and Harrisburg wrestle with regulating video game 'sweepstakes'

Six people sat playing casino-style games on computers one evening last week in B&B Business Centre Inside on N.C. 49 in Harrisburg. Cards and slots fly across the screen. They were hoping to win big.

But it's not gambling; it's a sweepstakes, say proponents.

Sweepstakes operations have been spreading across the state, prompting local governments, including Concord and Harrisburg, to take action to restrict the businesses by adjusting zoning ordinances.

Harrisburg Town Council members approved ordinance changes last week to restrict electronic gaming operations to C-2 zoning districts, which are broad commercial zones, and require a conditional use permit. Council members indicated they would like to consider more stringent regulations similar to those adopted by Concord.

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The Concord City Council changed city ordinances in March to allow electronic gaming operations only in C-2 zoning areas. Such businesses in Concord must now be at least 500 feet from residential zones, 200 feet back from some major roads and 1,500 feet away from other gaming operations, cemeteries, schools and day cares.

Concord's revised ordinance also limits such operations to 20 computer terminals and requires patrons be at least 18 years old. The city will also require a $2,600 privilege license fee and an additional $500 per machine. Existing electronic gaming operations have six months to comply.

B&B Business Centre advertises "sweepstakes" and "cash prizes," as well as Internet access and copy and fax services on its storefront.

Patrons often pay for a pre-paid long-distance phone card, which they need to play the games on computer terminals set up at several desks. By winning the games, players can accumulate points that earn them more time on the phone card to continue playing. Or they can also choose to turn in their phone card and receive the cash value of the time they would have accumulated.

Sweepstakes operations skirt state law because proponents argue the results are predetermined, and people are simply getting sweepstakes points as a bonus for buying Internet or phone time.

Recent court rulings have upheld the legality of the sweepstakes games. A Guilford County Superior Court judge recently issued an injunction to prevent law enforcement from raiding sweepstakes operations while litigation surrounding the case continues.

There are two stores in Harrisburg devoted entirely to the games, and several gas stations and restaurants in the area have added sweepstakes machines.

"We have to allow legal businesses a place to operate, but what we can do is restrict where those legal businesses operate," said Harrisburg town councilman Bob Scaggs, who is in favor of adopting an ordinance like Concord's.

Scaggs said he believes the businesses are "skating around" state gambling laws.

"It's my opinion that these businesses are detrimental to the quality of life that we're trying to create in Harrisburg," Scaggs said. "I just want to keep that out of Harrisburg until the General Assembly gets an opportunity to address it."

The N.C. state legislature is expected to examine the issue in an upcoming session.

Concord city attorney Albert Benshoff said the state has had trouble keeping up with the sweepstakes businesses' rapidly changing technology.

"The technology has changed faster than the amendments can be made," he said.

When the businesses first came to Harrisburg, the town didn't have specific zoning districts established for sweepstakes operations. When one business requested permission to operate in the Town Center in Harrisburg, officials had to interpret existing ordinances, said planning director Josh Watkins. Arcades and Internet cafes were allowed in the zoning district, and the electronic gaming business seemed to fit the same bill, Watkins said, but many officials and residents expressed concern about the games' similarity to gambling.

More stringent restrictions aren't necessarily meant to deter electronic gaming operations altogether, Watkins said. The changes made last week to Harrisburg ordinances will only affect new businesses coming to town.

Watkins said the requirements being considered are similar to the ones required of sexually oriented businesses by Harrisburg ordinances.

"It's allowed," Watkins said. "They just might have to jump through extra hoops."